Cameron Miranda
Usury laws refer to laws that limit interest rates or prohibit the charging of interest on loans. In the US, federal law does not focus on usury, leaving it to individual states to regulate. The Tennessee Code, under Title 47 Chapter 14, includes several sections that address usury and excessive charges. These sections outline the maximum interest rate allowed in Tennessee, the enforceability of contracts with usurious interest rates, and the statute of limitations for bringing claims related to usury or excessive charges.
| Characteristics | Values |
|---|---|
| State legal maximum interest rate | 10% per annum |
| Interest rate on money judgment | 10% per annum |
| Interest rate if judgment is based on a note or contract fixing another rate of interest | Same as agreed in the transaction |
| Charging a higher rate of interest than the permitted state legal maximum interest rate | Usury, a class A misdemeanor |
| Contracts requiring the payment of usury or excess loan charges | Not enforceable |
| Contracts where usury or excess loan charges are not apparent but are proved | Only the principal, plus lawful interest, loan charges, commitment fees, and brokerage commissions may be recovered |
| Statute of limitations on claims for usury | 3 years from the date of last payment, foreclosure, or court action |
| Statute of limitations on claims for excessive loan charges, commitment fees, or brokerage commissions | 3 years from the date of payment of the charges, fees, or commissions |
| Jurisdiction for the abatement and recovery of usury or excess loan charges | Chancery court, concurrent with courts of law |
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What You'll Learn
Tennessee's maximum interest rate is 10% per annum
Tennessee's maximum interest rate is set at 10% per annum, according to the state's constitution. This limit is in place to prevent usury, or excessive lending charges, and applies to various types of loans and transactions.
Tennessee's interest rate laws are outlined in Title 47, Chapter 14, Part One of the Tennessee Code, which covers Commercial Instruments and Transactions, as well as Interest Rates Generally. Specifically, Section 47-14-103 establishes the maximum interest rate that can be charged legally within the state.
This 10% cap applies to various financial situations. For instance, it applies to single-payment loans of $1,000 or less with terms of one year or less. It also applies to money judgments, including decrees and municipal court judgments, unless otherwise stipulated by statute.
Tennessee law also addresses usury and excessive charges in contracts. According to Section 47-14-117, any contract that requires the payment of usury or excessive charges is not legally enforceable. In such cases, the original lender or creditor can sue to recover the principal amount, plus any lawful interest, loan charges, and applicable fees.
It's worth noting that Tennessee's interest rates are subject to change. The Commissioner of Financial Institutions is required by Chapter 464 of the Public Acts of 1983 to announce the formula rate of interest weekly. These announcements ensure that the public is informed about any fluctuations in the maximum interest rates for different types of loans.
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Usury is a Class A misdemeanour
Usury is the act of lending money at an interest rate that is unreasonably high or higher than the rate permitted by law. In the United States, individual states are responsible for setting their own usury laws, and these laws vary from state to state. Usury laws protect consumers by governing the interest charged on loans and setting a limit on how much interest can be charged.
In Tennessee, usury or excessive charges on contracts are addressed in Title 47 (Commercial Instruments and Transactions), Chapter 14 (Interest Rates Generally), Part One (General Provisions) of the Tennessee Code. According to Section 47-14-103, the state's legal maximum interest rate is 10% per annum. If a lender charges a higher interest rate than this permitted maximum, it is considered usury.
Section 47-14-117 of the Tennessee Code states that any contract requiring the payment of usury or excessive loan charges is not legally enforceable. In such cases, the lender can only recover the principal amount and the lawful interest. However, if it is found that the lender has taken usurious interest, charges, or fees, they will be required to reimburse the debtor twice the amount collected, plus attorney fees.
Furthermore, Section 47-14-112 of the Tennessee Code specifically classifies usury as a Class A misdemeanour. This classification indicates that usury is a serious offence that carries legal consequences. While the specific penalties for a Class A misdemeanour may vary by state, it typically carries the potential for jail time and significant fines.
Tennessee also has a statute of limitations for usury claims. According to Tennessee Code § 47-14-118, no action shall be brought on any claim for usury after three years from the date of the last payment, foreclosure, or court action, whichever occurs first. This statute of limitations encourages prompt action on usury violations and helps maintain the integrity of legal claims.
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Usury contracts are not enforceable
Usury is the act of lending money at an interest rate that is unreasonably high or above the legal rate. The legal rate of interest is set by each individual state. In Tennessee, the maximum interest rate is 10% per annum, as per Tennessee Code, Title 47, Chapter 14, Part One (General Provisions).
Usury laws protect consumers from predatory lending and high-interest rates. These laws are enforced by individual states rather than at a federal level. In Tennessee, usury is considered a Class A misdemeanour.
The effectiveness of usury laws is often debated, and financial institutions can sometimes circumvent limits. For example, the high court's decision in the Marquette National Bank v. First of Omaha Corp. case allowed credit companies to charge customers out of state at the same interest rates the companies could charge in the states where they were incorporated. Additionally, some states, like Delaware, have introduced acts that eliminate limits on fees and interest that can be charged on consumer lending.
It is important to note that even loans that are exempt from usury laws may still be litigious under unconscionability statutes. Unconscionability refers to the idea that one party in power forces unreasonable terms on the other, typically the consumer or borrower under a loan. Courts will not enforce contracts that are "overly harsh" or "oppressive," regardless of whether they meet the legal definition of usury due to an exemption. For example, in California, the Supreme Court ruled that a loan with an interest rate above 135% falls under the unconscionability clause of California finance law, even if it is not considered usurious under the state's usury law.
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Lenders can reclaim the principal and lawful interest
Tennessee's constitution does have a usury law, which is stated in Tennessee Code, Title 47 (Commercial Instruments and Transactions), Chapter 14 (Interest Rates Generally), Part One (General Provisions). Under this law, any contract that requires the payment of usury or excess loan charges, commitment fees, or brokerage commissions is not enforceable. However, this does not mean that lenders are unable to reclaim what they are owed.
Section 47-14-117 of the Tennessee Code outlines that while a contract that charges usurious interest is not enforceable, the lender can still recover the principal amount and the lawful interest. This means that lenders can reclaim the principal and lawful interest, even if the contract is not enforceable due to usury or excessive charges.
Tennessee law defines usury as charging a higher rate of interest than the permitted state legal maximum interest rate, which is currently ten percent per annum. If a lender is found to have taken usurious interest, charges, or fees, they will be required to reimburse the debtor twice the amount collected, in addition to attorney fees.
It is important to note that there is a statute of limitations on claims for usury or excessive charges. According to Tennessee Code § 47-14-118, no action shall be brought on any claim for usury or excessive charges after three years from the date of the last payment, foreclosure, or court action, whichever comes first.
In summary, while Tennessee's usury law renders contracts with usurious interest unenforceable, lenders can still reclaim the principal and lawful interest owed to them. However, lenders found guilty of unconscionable conduct in taking excessive interest may not be entitled to recover any interest or charges and may be required to refund the borrower twice the amount of interest collected, in addition to attorney fees.
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Statute of limitations for usury claims is three years
Tennessee, like other states, has laws regarding time limits for filing civil lawsuits and criminal charges, known as statutes of limitations. The state is stricter than most when it comes to the length of time a person has to file a lawsuit, particularly in the case of personal injury claims.
The statute of limitations for usury claims in Tennessee is three years. This means that no action can be brought on any claim for usury after three years from the date of the last payment, foreclosure, or court action, whichever comes first. Similarly, no action can be brought on any claim for excessive loan charges, commitment fees, or brokerage commissions after three years from the date of payment of these charges, fees, or commissions.
It is important to note that these statutes of limitations may not be the most recent version, and Tennessee may have more current or accurate information on its official sources.
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Frequently asked questions
The term "usury" dates back to the Middle Ages, where it was used negatively to refer to any kind of interest-bearing loan. Gradually, as interest became more accepted, the term usury was used in reference to excessively high interest rates.
The state-legal maximum interest rate in Tennessee is 10% per annum.
Charging a higher rate of interest than the permitted state-legal maximum interest rate is usury. Usury or excessive charges are outlined in Section 47-14-117 of the Tennessee Code.
If a lender is found to have taken usurious interest, they will have to reimburse twice the amount collected from the debtor plus attorney fees.
